Reality Of Currency Trading


Online currency trading in India is still in its infancy but is slowly gathering momentum over the past two to three years. Many investors have begun to understand the true value of currency trading in not only diversifying a portfolio, but also reducing or balancing risk. Online currency trading is a great and wide platform for investors to trade in prominent global currencies.

Different traders have their own preferences of stock market blocks. Some people like putting their money in equities, some in commodities, and some in mutual funds. It is now that they start thinking about diversifying their portfolio while reducing risks and put their money into currency trading.            
Currency trading is nothing but buying and selling or foreign exchange or currencies. You will be surprised to know that the daily turnover of global currency trading is more than $5 Trillion. This clearly defines the potential currency trading has in store for you. Please note that the purpose of currency trading varies with every trader. Some traders like to use it for institutional-level investment while some do it for hedging risks from imports/exports. The best distinguishing factor for currency trading is that it operates round-the-clock, unlike other trading options.

Currency trading happens in pairs. When you buy a stock, for instance, you buy it in single units. However, when it comes to currencies, you buy it in pairs, i.e. INR-USD. One is called the base currency while the other is called the quotation currency. The value of currency trading can be calculated by dividing the base currency by quotation currency. Thus, currency trading requires you to have a dual perspective. Price fluctuations in the currency segment are represented by PIPs, which stands for Percentage in Points. Mathematically, it is 100th of 1%. It can go to the 4th decimal of your currency value. Thus, value of the currency shows up to the 4th decimal point.

In India, currency trading is allowed only against trades that are benchmarked against INR. In India, you can only trade in USD/INR, EUR/INR, GBP/INR, and JPY/INR. Exchanges that do currency trading in India are MCX and NSE. These are the only two licensed exchanges for currency trading in India.

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